What is the story with the proposed Lamu coal plant?

DeCOALonize Resource Source

Summary: The proposed Lamu Coal Plant will not only cause irreversible environmental and social harm to the region, but basic economics indicate the project is not viable. Furthermore, it will cause the price of electricity in Kenya to increase, and the Kenyan public will face the burden.

Who, What, Where

• Amu Power has proposed to build a 1050 Megawatt coal plant in Kwasasi, Lamu County. It would be the first coal plant in East Africa and — despite community opposition and economic uncertainty, is making its way through licensing approvals.
• Amu Power is a special purpose joint venture of two Kenyan companies: Gulf Energy and Centum.
• The coal plant is expected to cost USD $2 billion, a loan to be borrowed from China Power Global.
• The coal would be imported from other countries. Tentative plans to begin coal mining in Kitui, Kenya, would take at least six years to develop according to energy ministry officials.
• To transport coal from Kitui, taxpayers will pay for an extended railway. The project proponents’ ESIA estimates the railway will cost (at least) an additional USD $2 billion.
• The electricity is slated to electrify Nairobi, and taxpayers will pay an additional USD $270 million for the Kwasasi-Nairobi transmission line.

What will it cost Kenyans?

• The economics of the plant are dubious: the cost of coal required to make the electricity and the price of electricity being high enough to cover the price of coal and the debt payments on the construction of the plant, transmission line, and railway.
• At the time that Amu Power calculated the price of electricity at the proposed plant, the actual price of coal was 50% higher than Amu Power’s estimate. The price of coal constantly fluctuates (high volatility), is currently even higher than it was in 2014, and has a direct impact on the price of electricity.
• The price of Lamu coal plant electricity would be much higher than estimated — at least USD $0.11 per kilowatt (using the formula from the former Chairman of the Kenyan Energy Regulatory Commission) which is currently more expensive than electricity generated from solar, wind, or hydro (all of which Kenya has in abundance).

The plant is not necessary to keep the lights on

• Kenyan demand is not enough to warrant a power plant of this size. The Kenyan government estimated an electricity usage growth rate of 11.5% and then 15% and a peak demand in 2030 of 10,000–15,000MW in the 2011 and 2013 Least Cost Power Development Plans (LCPDPs).
• The Kenya government overestimated the growth rate of electricity use at 15% (the historical average is 6%) and a peak demand in 2030 of 10,000–15,000MW. Lahmeyer International, an independent engineering consultancy, projects electricity demand in Kenya to grow at 9% and the peak demand for electricity in Kenya in 2030 to be 5,000MW.
• These estimates can be treated with confidence, as prior LCPDPs have been accurate in their predictions of near-term growth rates. For example, the 2004 report predicted about 6%. From 2005 to 2009, Kenya’s energy demand grew at 5.5%.
• The former head of the Kenya Energy Regulatory Commission, Hindpal Jabbal Singh, calculated a future growth rate of 7–8.5%. He found that Kenya can meet peak 2030 demand with existing resources and available renewable energy resources — including hydro imports from Ethiopia — and currently untapped geothermal and wind capacity

Why does this matter? Because national electricity provider Kenya Power (KPLC), a public company whose majority shares are owned by the Ministry of Finance, will be contractually obligated to pay Amu Power — to purchase a set amount of electricity, even if that electricity is not produced. Based on the Power Purchase agreement, former ERC head Hindpal Jabbal Singh in his sworn testimony estimated the cost to KPLC, and thus to taxpayers, to be USD $350 million per year for 25 years.

Furthermore,

• Many residents of Lamu County are opposed to the plant because burning coal will harm their lives and livelihood.
• Residents are arguing in courts that the economic, environmental, and health impacts they will endure as a result of burning coal for electricity have not been sufficiently considered in granting a license for the plant. And that the plans to protect them from health and economic harm are insufficient.
• Residents claim that project proponents have not met even minimal requirements to inform and hold public participation fora with the affected communities, while they have been subject to intimidation and interference when trying to hold community discussions about the project, as well as false allegations by the County Commissioner, following pressure from the Deputy President.

For additional information:

Background documents at deCOALonize.org.

More factsheets:

Why will electricity prices increase if the plant is built?
Does Kenya need the plant to support economic growth?
Is burning coal that bad?
How does the proposed plant affect Lamu’s water?
Impact on World Heritage site